US casinos play Russian roulette in Macau

Pulling in four times as much annual revenue as Las Vegas and Atlantic City combined, Macau is the world’s undisputed gambling hub, but with big profits comes big risks in the form of organized crime and corruption

By Hannah Dreier / AP, LAS VEGAS, Nevada

“The reason why we don’t do a full giant investigation on them is that they have no control over the casino operations; they are basically travel agents and hosts,” Nevada Gaming Control Board chairman A.G. Burnett said.

If another jurisdiction finds fault with a junket operator licensed in Nevada, state regulators will simply ask the operator to submit to a suitability workup, which is tantamount to telling them to get out, Burnett said.

Still, regulators are not blind to the link between junkets and triads.

At a hearing before a congressional advisory panel last month, Burnett said it is “common knowledge that the operation of VIP rooms in Macau casinos had long been dominated by Asian organized crime.” Steve Vickers, who spent 18 years in the Royal Hong Kong Police Force and commanded its criminal intelligence bureau, believes that nearly all junkets that cater to Chinese tourists collaborate with organized crime.

“You won’t find the triad names listed as the junket operators, but they are behind it, because who is it that can reach into China and enforce the debts, move the money? Only one kind of person can do that,” said Vickers, who now runs a consulting company.

REGULATORS VS CASINOS

In the 1980s, Nevada State regulations, along with an FBI crackdown, helped push out the mob bosses who had taken refuge in the gambling world and usher in the industry’s modern corporate era.

Today, US states can impose fines or revoke licenses if any US companies are found to have acted improperly in Macau. However, except for rare instances like New Jersey’s action against MGM, regulators have so far refrained from public action, preferring to wait until federal probes are complete.

Burnett said that does not mean regulators are sitting idle.

“A lot of what goes on is dialogue between the board and the companies that the public doesn’t necessarily see,” he said.

Conventional wisdom is that no US companies will lose their licenses over the allegations, even if proven true. At worst, they could get fined, said Michael Paladino, an analyst at the credit ratings agency Fitch.

“They can handle that,” he said, adding that the largest fine under the act imposed to date — on German engineering giant Siemens A.G. for bribery — amounted to about US$1 billion, less than one month’s revenue for Sands.

The balance of power between casinos and regulators has shifted as gambling companies have achieved their own version of outsourcing, according to Nelson Rose, a professor at Whittier Law School in California who writes a blog called Gambling and the Law.

“Macau forced the casinos to see that they could become like other large US corporations: Set up their plants and operations in other nations, and make far more than they can being stuck just in Las Vegas,” he said, speaking from his hotel room near Macau University, where he teaches a summer course.

Sands, Wynn and MGM have structured their China operations as subsidiaries that could eventually be spun off entirely.

In any case, public officials are not exactly clamoring for investigations. Among the ranks of the unconcerned is former Las Vegas mayor Oscar Goodman, a one-time lawyer for mob figures. Sitting on an overstuffed green leather couch his living room, Goodman, whose wife is now mayor, said he does not worry about Macau because Americans are not paying attention to the murky allegations there.